How is angel funding different from venture capital?

David Wu / November, 2017

Description

David Wu, General Partner at Maveron explains the different reasons to why an angel would invest and why a professional investor would invest, and how the chances of you getting funding from an angel vs. VC is different.

Video Transcript

How is angel funding different from venture capital?

I think fundamentally starting off from the investor side, they’re very different things because angel money is generally money that a person is investing their own money. Whereas, in venture capital, these are people that are doing this professionally and they’re investing other people’s money. And so the fundamental difference there is: when you’re investing your own money you can invest for any reason that you want. It can range from meeting cool people to paying it forward, to wanting to stay current, all the way to making money. Fundamentally, almost all VC is driven, when you’re investing other people’s money you’re almost always investing to make money, and your number one question is: how is this investment going to make me money.

So when you flip that around on the consumer side, you understand those differences. One, on the angel side there’s a huge breath, like I said before, of reasons why angels are investing in a business. On the VC side, if you get 10 nos, you’re probably going to get an 11th and 12th no, and no one is going to invest. Whereas angels, you may talk to 100 angels that don’t see what you’re talking about and then the next 20 may love what you’re talking about because their reasons for investing are incredibly different. At the same time, they are writing smaller checks and they are writing checks often earlier. The strategy of getting angels versus getting institutional investors that are investing other people’s money is really really different in terms of how you can slam.